People homozygous for mutations in the Niemann-Pick type C1 (NPC1) gene have physiological defects, including excess accumulation of intracellular cholesterol and other lipids, that lead to drastic neural and liver degeneration. The NPC1 multipass transmembrane protein is resident in late endosomes and lysosomes, but its functions are unknown. We find that organelles containing functional NPC1-fluorescent protein fusions undergo dramatic movements, some in association with extending strands of endoplasmic reticulum. In NPC1 mutant cells the NPC1-bearing organelles that normally move at high speed between perinuclear regions and the periphery of the cell are largely absent. Pulse-chase experiments with dialkylindocarbocyanine low-density lipoprotein showed that NPC1 organelles function late in the endocytic pathway; NPC1 protein may aid the partitioning of endocytic and lysosomal compartments. The close connection between NPC1 and the drug U18666A, which causes NPC1-like organelle defects, was established by rescuing drug-treated cells with overproduced NPC1. U18666A inhibits outward movements of NPC1 organelles, trapping membranes and cholesterol in perinuclear organelles similar to those in NPC1 mutant cells, even when cells are grown in lipoprotein-depleted serum. We conclude that NPC1 protein promotes the creation and/or movement of particular late endosomes, which rapidly transport materials to and from the cell periphery.